My friend asked me the other day whether I thought high yield savings accounts were worth it. He’s an engineer and a numbers guy at heart, so he appreciates the mathematical differences between an online savings account and your standard no-interest checking account. What he wanted to know was whether there were headaches involved in dealing with something that was online-only.

I think that as I’ve gotten older, the amount of headache I’m able to stand has dropped significantly. A few years ago, I’d be willing to stay on the phone for an hour with a Comcast rep arguing down my bill. I’d research purchases for hour, then wring my hands for days, and then research some more before pulling the trigger. Now? With all the other headaches I have, the last thing I want to do is add to the mix!
Ultimately, I feel that based on the nature of the relationship I have with banks, online savings accounts are worth it.

Here’s what you’re in for when you open an account with an online bank:

Phone and online customer service only: You can’t go to an online bank, so all of your contact with the bank will be through online chats, emails, or over the telephone. You won’t be able to go into a branch and talk to a teller or a representative. You won’t be able to diagram what you want to do on a piece of paper.

You won’t build a relationship with the bank. If you use a community bank or local credit union, you know what it means to build a relationship with a bank. You know the tellers, you know the manager. You talk to someone who knows you, what you want to do, and wants to help you on both a personal and professional level. You get none of that at an online bank no matter what they promise. With online banks, the relationship is strictly transactional.

Interest rates fluctuate all the time: Online banks are very fluid and in our current economic environment, don’t be surprised if rates drop the day after you deposit funds. Remember, a savings account does not guarantee its interest rate. The rates will be higher than a brick and mortar bank, reward checking accounts excluded, so you still win.

Higher probability you’ll get phished: Scammers send “phishing” emails pretending to be the bank in an attempt to get you to log into a fake bank account. They steal your information and then steal your money. We’re all savvy enough to know that Bank of America won’t email us, but online banks email you all the time. As you get used to this, you may inadvertently click on a phishing email and not even realize it.

Infrequent website outages: No website has 100% uptime year-round and when your main interface with a bank is through the website, there will be times when you want to log in but cannot. In recent memory this has happened less than a handful of times (never twice at once bank) but just once is almost too much.

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I think if you’re aware of possibly phishing scams and are comfortable working through on-line chat when you need customer service, the on-line banks is a good route. Certainly, higher interest rates are an incentive. Infrequent website outages and person to person relationships are less of a concern for me. I probably wouldn’t ever have a personal relationship with an instituion as large as B of A and they could just as easily have down – time or an outage on their site. I would recommend for people to experiment through an on-line savings account. Keep you current account, but move some cash over to the on-line account and get comfortable with the services before moving all your savings into it.

1. When I was at the local bank, I would, 9 times out of 10, call its customer service number or go online. That is, treat it pretty much like an online-only bank. Comparatively speaking, I feel that my online savings bank (Ally) is actually more responsive and attentive than my local bank (Regions).

2. I may be one of the oddballs, but I never truly built a “relationship” with the people at the local bank. Mainly because I moved twice in the last 4 years, but also because I would rarely get the same teller twice.

3. Interests rates fluctuate at local banks as well. Online savings banks are almost always better than local banks.

4. I can’t speak to phishing, but I’m sure it’s equally a problem if you use the online services of a local bank.

5. Website outages are to be expected. Fortunately, that’s where the customer service number comes in. Luckily, I have not experienced this yet. However, this would be “similar” to the local bank only being open 8 AM to 5 PM.

I remember having this discussion with a buddy of mine, and there is a relatively easy solution. He was less than alright with playing out some of the cons you spoke of, so I found him an online high yield account WITH HIS CURRENT B&M bank!

He had HSBC and their garbage normal savings account, and I am not sure if it the type of account exists anymore, but I googled HSBC High Yield Account and boom in 5 mins he increased his interest rate by 6X and didn’t lose any of B&M positives.

I live in Upstate NY. One of the leading banks in this area had its customers information stolen THREE TIMES!!! They had to reissue cards all the times to all their customers. They are still the leading bank in the three to four counties around here, but this brick bank has poor safety features.

ING has been awesome. I’ve had an account there for almost a decade and have never had any trouble with them.

I was also very pleased with Citizens until the spontaneously decided to get out of retail banking, leaving me with 4 months to make alternate arrangements for my chequing account. But I suppose any small bank could do that, online or off. The only hassle that deals strictly with the online nature was that to set up a line of credit I had to take the papers to Notary Public to sign, at a cost of $50.

I figure the lower fees paid for that $50 the first time I left the country, so no big deal, but a hassle none the less.

Honestly, physically going into a bank and standing in line is WAY more hassle than dealing with online institutions.

When I dealt with a traditional large bank, I would get legit emails from them about once a month – about the same frequency as ING and far more frequent than Citizens. I have never seen a phishing email with either ING or Citizens branding, but I still get them branded with my old Big 5′s logo (and other Big 5′s I’ve never had any dealings with).

I haven’t had any headaches with any of my online banks…I’ve worked with WaMu, ING, Etrade and Amtrust and the only real hassle I had was getting Chase to close my old WaMu account that I wasn’t using during the transition.

I’ve never had a problem with ING, but I’ve had horrible horrible problems at my community bank. I’ve sat in the bank for over an hour to open an account. I’ve had checks debited TWICE, bounced checks because of the random double debit, and had the manager basically tell me there was nothing they could do. It was a $400 check debited twice and I was only 19 at the time so it really wiped me out, and they said they fought with me about giving me my money back.
So I expect a hassle when it comes to banking, and ING had really been perfect so far.

One ‘hassle’ you forgot to mention was the wait time if you need a large amount of cash and have to do a transfer to a regular bank first.

I am also a big fan of ING and I have not had any problems with them. I don’t use cash at all since I am working my credit card rewards programs and I have not felt any need to build a relationship with my banker.

I have two accounts a checkings with USAA, and a online savings with DollarSavingsDirect.com. I never had a problem with any of the two. I guess the only down side to this is if you transfer money it can take up to 5 days to get the transfer between the two accts. The good thing is that USAA lets you used any ATM for free, and their online bill pay is superb…. the online saving is where I store the cash that I don’t wanna touch and it helps me save. I wish they had the subaccounts options like “ing” but I can deal with that. When I open my online savings I was getting a 4% apr but now is down to 1.70%

I use my ING online savings account as an intermediary for my family member’s checking accounts so we can do free wire transfers. My sister helps pay for the mortgage on a house we bought together. It was really inconvenient to meet every month to get cash or a check from her. So, I set up my ING online savings account to automatically draw directly from her checking account. (I’m CHASE and she’s WELLS FARGO)

I view the list of hassles as actually being some of the benefits of online banks.

Phone and online customer service only:

Thank god, you mean I don’t have to deal with people in person and am not required to leave my house. This is definitely a benefit.

You won’t build a relationship with the bank:

I mean, a quick smile and hello is nice, but I can do without the additional relationships. It’s a little embarrassing having friends know how broke you are when you’re asking if you have enough funds to cash a $15 check.

Interest rates fluctuate all the time:

For similar accounts that are free, most brick and mortar accounts don’t offer higher rates than the lowest fluctuations of online bank rates, so I guess I can live with the bipolar interest rates.

As a Fossil (over 50)it is funny to read how the loss of personal relationships in banking is perceived today. Don’t worry, I am not about to lecture you young pups on the good ole days when the bank lobby had a real friend in it that was empowered to “bend” the rules. However I must share that when I talk with my 82 yr. old Mom, and she remembers real oatmeal and food from her garden, (now Organic and mostly Marketing) we agree that “they” can’t wait for the older generation to die….then “they” can tell the next gen how great the diluted (service,food,etc) they are getting is with no one around to refute it!

I was a little reticent too, until I realized I’ve visited a physical branch of my credit union twice in the past year. Everything else I’ve done online or through ATM’s, and banks that are exclusively online tend (as they should) to have better user interfaces than those where it’s an afterthought tacked on as technology grew up around them.

I love doing my banking online, so it makes sense for me (especially considering the higher interest rates). Plus I have an ATM card if I needed cash quickly.

The one time I did need to speak with someone, it was a hassle. I went to the bank thinking someone could help me only to get the runaround for about a half hour until someone figured out I needed to call their corporate office.

Other than that, I really can’t complain. I just use it for my savings and rarely touch the account unless it’s to deposit/draw money (which is rare anyways).

Online savings are great for a second or third account that you don’t plan on using. Always have a brick and mortar bank account for the emergencies in life, because the turn around for your funds is slow. If you do plan on using it, especially as a emergency fund, be aware that transfering the money in may take as long as a week and transfering money out may take 10-14 days.

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